CREDIT TRANSACTIONS1

[Follow the Outline]

Part ONE
Modified True or False. Consider the statement true only when it is absolutely true.
Explain ALL your answers.

1. The indivisibility of a pledge or mortgage is not affected by the fact that the debtors are not
jointly liable.

2. Incorporeal rights may also be pledged.

3. A pledge shall not take effect between the parties if a description of the thing pledged and the
date of the pledge do not appear in a public instrument.

4. The guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had
against the debtor.

5. A guarantor may bind himself for more, but not for less than the principal debtor.

6. A mortgage may also be given as security for future debts, the amount of which is not yet known.

7. The bailor in commodatum acquires the use of the thing loaned but not its fruits; if any
compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum.

8. Consumable goods may be the subject of commodatum.

9. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed
by the provisions concerning commodatum.

10. A deposit is constituted from the moment there is a meeting of the minds upon the thing which is
the object of the contract.

Part TWO
Multiple Choice. Choose the best answer.
1. A contract which is both a real and an accessory contract is:
a. commodatum b. deposit c. mortgage d. pledge e. antichresis

2. A contract which is both a principal and a real contract is:

a. mutuum b. pledge c. mortgage d. antichresis e. lease

3. If a personal property is delivered to a creditor to secure the performance of an obligation, the

contract is a:
a. pledge b. chattel mortgage d. real mortgage d. antichresis e. sale

4. With this contract, the principal obligation may be extinguished:

a. pledge b. chattel mortgage c. real mortgage
d. antichresis e. none of the above

5. The subject matter of a contract of deposit may NOT be:

a. movable b. immovable
c. consumable d. non-consummable
e. non-fungible

6. This bailment is solely for the benefit of the bailee:

a. mutuum
b. commmodatum
c. gratuitous deposit
d. onerous deposit
e. gratuitous guaranty

7. In the following contract/s, ownership passes to the other party:

a. mutuum
b. commmodatum
c. deposit
d. a&b
e. a&c
f. a, b & c

8. The following are real contract/s:

a. mutuum
b. commmodatum
c. deposit
d. a&b
e. a&c
f. a, b & c

9. A deposit made in compliance with a legal obligation is a:

a. judicial deposit
b. extra-judicial deposit
c. voluntary deposit
d. necessary deposit
10. The pledge is void if the
a. pledgor’s consent was vitiated
b. pledgor is suffering civil interdiction
c. pledge is not in writing
d. pledge is not in a public instrument

Part THREE
Give direct and concise but complete answers.
Cite authorities, if any.

1. Distinguish briefly but clearly between Mutuum and commodatum.

2. Before he left for Riyadh to work as a mechanic, Pedro left his Adventure van with Tito, with the
understanding that the latter could use it for one year for his personal or family use while Pedro
works in Riyadh. He did not tell Tito that the brakes of the van were faulty. Tito had the van
tuned up and the brakes repaired. He spent a total amount of P15,0000.00. After using the
vehicle for two weeks, Tito discovered that it consumed too much fuel. To make up for the
expenses, he leased it to Annabelle. Two months later, Pedro returned to the Philippines and
asked Tito to return the van. Unfortunately, while being driven by Tito, the van was accidentally
damaged by a cargo truck without his fault.

a. Who shall bear the P15,000.00 spent for the repair of the van? Explain.

b. Who shall bear the costs for the van’s fuel, oil and other materials while it was with Tito?
Explain.

c. Does Pedro have the right to retrieve the van even before the lapse of one year? Explain.

d. Who shall bear the expenses for the accidental damage caused by the cargo truck,
granting the truck driver and truck owner are insolvent? Explain.

3. A, upon request, loaned his passenger jeepney to B to enable B to bring his sick wife from
Paniqui, Tarlac to the Philippine General Hospital in Manila for treatment. On the way back to
Paniqui, after leaving his wife at the hospital, people stopped the passenger jeepney. B stopped
for them and allowed them to ride on board, accepting payment from them just as in the case of
ordinary passenger jeepneys plying their route. As B was crossing Bamban, there was an onrush
of lahar from Mt. Pinatubo. The jeep that was loaned to him was wrecked.

a) What do you call the contract that was entered into by A and B with respect to the
passenger jeepney that was loaned by A to B to transport the latter’s sick wife to Manila?

b) Is B obliged to pay A for the use of the passenger jeepney?

c) Is B liable to A for the loss of the jeepney?

4. Siga-an granted a loan to Villanueva in the amount of P 540, 000.00. Such agreement was not
reduced to writing. Siga-an demanded interest which was paid by Villanueva in cash and checks.
The total amount Villanueva paid accumulated to P 1, 200, 000.00. Upon advice of her lawyer,
Villanueva demanded for the return of the excess amount of P 660, 000.00 which was ignored by
Siga-an.

a) Is the payment of interest valid? Explain. (3%)

a) Is solutio indebiti applicable? Explain.

5. Due to the continuous heavy rainfall, the major streets in Manila became flooded. This
compelled Cris to check-in at Square One Hotel. As soon as Cris got off from his Toyota Altis,
the Hotel’s parking attendant got the key of his car and gave him a valet parking customer’s claim
stub. The attendant parked his car at the basement of the hotel. Early in the morning, Cris was
informed by the hotel manager that his car was carnapped.

(A) What contract, if any, was perfected between Cris and the Hotel when Cris surrendered the
key of his car to the Hotel’s parking attendant?

(B) What is the liability, if any, of the Hotel for the loss of Cris’ car?

6. Ana rented a safety deposit box at the Alto Bank, paid the rental fee and was given the key. Ana
put her jewelry and gold coins in the box. Days after, three armed men gained entry into the Alto
Bank, opening its vault and several safety deposit boxes, including Ana’s and emptied them of
their contents.

Could Ana hold the Alto Bank liable for the loss of the contents of her deposit box? Explain.

7. X entered into a guaranty without the knowledge of A, the principal debtor. The obligation of A
in favor of B was also secured by a real estate mortgage executed by Y. Upon default of A, X
paid B. A failed to reimburse X despite demand.

If X files an application for the foreclosure of the mortgage, will it prosper?

8. In the province, a farmer couple borrowed money from the local merchant. To guarantee
payment, they left the Torrens Title of their land with the merchant, for him to hold until they pay
the loan. Is there a --
a) contract of pledge,
b) contract of mortgage,
c) contract of antichresis, or
d) none of the above?

Explain.
9. Distinguish a contract of chattel mortgage from a contract of pledge. (2%)

10. Give an example of a pledge created by operation of law.

11. Vini constructed a building on a parcel of land he leased from Andrea. He chattel mortgaged the
land to Felicia. When he could not pay Felicia, Felicia initiated foreclosure proceedings. Vini
claimed that the building he had constructed on the leased land cannot be validly foreclosed
because the building was, by law, an immovable.

Is Vini correct?

12. To secure the payment to B of a loan, A, the owner of a lot, executed a chattel mortgage on the
building he erected thereon as well as on some newly bought machinery stored therein.
Thereafter, a judgment was rendered against A in favor of C who had the building and machinery
levied upon to satisfy the judgment.

Is the chattel mortgage binding on C? Explain.

13. A, B and C borrowed P300,000 from X secured with the delivery of a ring, watch and necklace
owned by A, B and C, respectively. The value of the ring is P150,000, the watch P100,000 and
the necklace P50,000. Thereafter, C paid P50,000. Can C validly demand for the return of the
necklace?

14. X borrowed money from Y and gave a piece of land as security by way of mortgage. It was
expressly agreed between the parties in the mortgage contract that upon non-payment of the debt
on time by X, the mortgaged land would already belong to Y. If X defaulted in paying, would Y
now become the owner of the mortgaged land? Why?

Suppose in the preceding question, the agreement between X and Y was that if X failed to pay the
mortgage debt on time, the debt shall be paid with the land mortgaged by X to Y. Would your
answer be the same as in the preceding question? Explain.

15. To secure a loan obtained from a rural bank, Purita assigned her leasehold rights over a stall in
the public market in favor of the bank. The deed of assignment provides that in case of default in
the payment of the loan, the bank shall have the right to sell Purita’s rights over the market stall
as her attorney-in-fact, and to apply the proceeds to the payment of the loan.
 1) Was the assignment of leasehold rights a mortgage or a cession? Why? (3%)

2) Assuming the assignment to be a mortgage, does the provision giving the bank the power to
sell Purita’s rights constitute pactum commissorium or not? Why? (2%)

16. Mr. Matunod lent Mr. Maganaka the amount of P100,000.00. As security of the payment of said
amount, Maganaka delivered to Matunod two rings in pledge. When Maganaka failed to pay,
Matunod foreclosed, and had the rings sold at auction. The proceeds of the sale, after deducting
expenses, amounted to only P70,000.00.

a) May Matunod demand the deficiency from Maganaka? Explain.

b) Assume that the proceeds, after deducting expenses, had come up to P150,000.00.
Would Matunod have been entitled to the excess? Explain.

c) Suppose the rings, instead of being pledged, had been mortgaged to Matunod, would
Matunod have been entitled to the deficiency if the sale’s proceeds were less than the
indebtedness or to the excess, if the proceeds were more? Explain.

17. A diamond ring and female cow were pledged to secure a loan in the amount of P100,000. The
pledge appeared in a public instrument. A month later, the cow gave birth. When the amount of
the loan was not paid upon its maturity date, the pledged caused to be sold at a public auction the
ring, the cow and the cow’s offspring and the amount of P150,000 as realized. The pledgor, upon
learning of the sale, demanded from the pledgee the excess in the price over and above the
amount of the principal obligation, claiming that he is entitled to the excess and that the offspring
was not included in the pledge. The pledgee refused to comply with the demand. How would
you decide this conflict? Give your reasons.